Why Alibaba is the giant Australian retailers should really be worried about

Forget Amazon: Alibaba is the resource and data-hungry retail giant we should all be keeping a careful eye on, explains Transform's Ian Pocock.

With Alibaba opening its first office in Australia earlier this year, and Amazon launching just a few weeks ago, it’s easy to see why retailers are shaking in their stores.

Even the country’s largest traditional retailers have their concerns about the ecommerce giants wading into their sector and eating up that all important market share.

However, while at the moment Amazon is the talk of the town, it’s far more likely that Alibaba will have the most impact on retailers in Australia.

In the APAC region alone, Alibaba sales easily outdo anything that Amazon can achieve, even with the development of its products, offers and infrastructure in the region. But just how much of a threat is Alibaba to the country’s retailers?

One of the biggest challenges for any retailer in the Australian market is logistics. You could have the greatest product in the country, but unless you can deliver it to remote locations and make it easily accessible, then you are automatically missing out on a large portion of potential customers. Traditional legacy brands struggle with this, let alone start-ups or mid-tier retailers.

But Alibaba is already ahead of the curve. In fact just last month, it used unmanned drones to transport six boxes of passionfruit to remote Chinese islands.

Although it could be argued that Alibaba is simply paving the way for other retailers to do this in the future, the reality is that in order to achieve this at scale, you need an extraordinary amount of resources, which most simply don’t have. The likelihood is that Alibaba will implement something similar in Australia in order to reach those all-important rural areas.

Not only does Alibaba have the resources, whether that be the tech talent or the money to pull off futuristic deliveries, they also have unrivalled amount of data, which is so invaluable to retailers.

This data allows Alibaba to understand its customers like no other, and goes far beyond a Woolworths Rewards card. It knows your spending habits, where you live and that you play netball every Tuesday. When you also factor in its voice assistant, the Tmall Genie, it can even differentiate your likes to that of your child’s, simply by hearing your voice.

So what can retailers do to ensure they don’t get swept away in a sea of big data and drones?

Many retailers will join them and make use of the marketplace it has to offer and some will go that step future and partner with them. Starbucks, is a great example of a big brand name working with the retail giant. The coffee brand worked with Alibaba in Shanghai to create the largest Starbucks store in the world, complete with augmented reality and its very own Roastery smartphone app.

American car maker Ford has signed a three-year partnership with Alibaba’s Tmall online marketplace, which could see them sell cars through the site.

Other retailers will do what they can to fight the revolution, ASOS, for example, has introduced image search to show they are innovating as quickly and effectively as the tech giants and Walmart has made a name for itself as an Amazon opponent, with recent moves including expanding its online grocery pick up service and bringing on board high-end brands, such as Hudson Bay in the US.

Whist cracking a new market is difficult for any business, technology giant or not, it’s important to remember that Alibaba was not only created in the largest internet market in the world, but also that it controls 80% of China’s ecommerce market – putting them in prime position to dominate the Australian market.

In Western markets, Alibaba is completely unfamiliar to the majority of consumers, which leads many to award Amazon the crown of global ecommerce leader, unchallenged. However it would be naive to downplay the threat.

When considering that during Amazon’s Prime Day in July the company generated an estimated $1 billion, whilst Alibaba’s equivalent Singles day with Tmall generated $25.3 billion, Amazon is barely a drop in the water compared to its Asian counterpart – which is quietly waiting to make its move of the rest of the world.

Alibaba is the most powerful retailer in the world, and the only way for retailers big and small to compete with the tech giant is to innovate at the same rate, or join them.

But, one thing is for sure, Australian retail is about to be severely disrupted and whoever comes out on top will be one step closer to global ecommerce dominance.

Ian Pocock is international managing director at Transform.


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